How To Avoid Hyperinflation (Part 2 of 2)

The Gross Domestic Product (GDP) is a measure of the economic activity in a country. Because in modern times innovation has become a permanent feature of the economy, the latter must always expand to keep unemployment from rising. And when the economy expands, the GDP shows a growth which we express as a percentage.

But what is it that causes an economy to grow in the first place? Well, the way things are concocted now - as they have been for decades - is that the money supply is made to increase. It is done in one of two ways or a combination of the two. They are the use of the fiscal tool and/or the monetary tool to stimulate the economy.

The fiscal stimulus takes the form of the lowering of taxes or the outright handing of money to the citizens by the government. As for the monetary stimulus, it takes the form of the lowering of the interest rate by the central bank. This encourages the businesses to borrow and produce more goods and services, and encourages the public to borrow and buy those extra goods and services.

But when you think about it, you realize that the availability of more money in the system is really not the cause for the increased business activity or the resulting economic expansion; the mood of the public and its level of confidence are. The money is only the means by which the level of confidence is raised, the mood is elevated and business is nudged. If this theory is correct, it gives rise to an interesting question which is this: Can we have an expansion that is not predicated on injecting extra money into the economy?

In my opinion the answer is yes, and I show why with this example. If a new product or service hits the market and gains popularity, and if the public clamors to buy it but the government and the central bank refrain from injecting extra cash into the economy, the business activity surrounding that product or service will still pick up.

To make this possible, something happens automatically in the economy which compensates for the lack of infusion of money; the existing supply circulates at a faster rate. The evidence that this is happening is seen in the bank transactions where the cash flow in the current accounts rises significantly, the demand for loans rises at a slower rate and the savings rise at an even slower rate.

These measurements will have to be recognized as a more accurate indicator that money is exchanging hands at a higher velocity than would be indicated by the equation MV = PQ which is increasingly coming under criticism due to the ongoing crisis related to the collapse of the housing market.

What all this means is that we can now decouple the fiscal tool from the monetary tool and not be bound to think of both as if they were inseparable twins. More than that, we should be able to use one tool to do one thing, use the other tool to do another thing and do them both at the same time even though they may look like two contradictory activities.

Let us now do a thought experiment. Assume we lower the interest rate to stimulate the economy artificially. The resulting regime of easy money will encourage the existing businesses to expand and will prompt a few people to start new businesses. This will add to the production of goods and services and thus help expand the economy.

But not every one of these ideas will deserve to stay alive for the long haul. And in fact, the mere presence of shaky businesses in the system has always been instrumental in feeding the inflationary pressures that develop into a bubble. These businesses stay alive only because the high tide of inflation lifts all boats and in return they nurture the high tide.

If nothing is done to remedy the situation, those ideas will linger on as long as money is easy to have. So we face a dilemma; if we change the easy money regime we kill the expansion of the economy, but if we do not change the regime, the inflation or the bubble will damage the economy and kill the expansion. What do we do?

Faced with a similar situation in the past, the decision has been to fine-tune the economy but this course of action, if it worked at all, worked for a short period of time after which the economy inflated. So the question now is this: Can we find a way to have it both ways? That is, can we maintain the economy in the expansion mode more or less indefinitely and still avoid the inflationary pressures and the dreaded bubble?

I believe there is a way. By mentally decoupling the two stimuli as we have, we created a new tool that can help us achieve that goal. What we do is keep the interest rate low but raise the taxes either selectively or across the board. The rationale is this. The low interest rate will encourage entrepreneurs to come up with new ideas and realize them, and it will encourage the public to consume the fruits of those ideas.

But if any of these ideas are shaky, the high taxes will not allow them to survive longer than they should. This course of action, though painful at first, will prevent inflation from spreading and will maintain the economy in the expansion mode. New business activities will come into existence where new businesses will be incubated to replace the dying ones.

The principle around which this approach must be designed is that the money supply should remain steady or grow at no more than 3% a year as suggested by Milton Friedman. Thus, the government will have to watch the growth of the money supply and adjust the taxes to siphon off at one end of the pipeline the extra money that goes into it at the other end due to the low interest rate.

And because the money supply will remain more or less steady, money will automatically circulate faster and thus maintain the economy in a state of expansion. The net result will be that we will have it both ways; the expansion we want without the inflation we dread.

There is now the question of what to do with the money collected through the extra taxes. I here presume that the government will be enjoying a budget surplus in which case three priorities should be set up. The first is to pay the foreign debt. The second is to pay the local debt. And the third is to destroy the rest of the money.

That last point is based on the notion that there should be no money floating out there which is not someone’s debt that is backed by an asset equivalent to its value or better. And we will know this point has been reached when the destruction of the money begins to raise the value of the currency. And this will happen because the removal of money from circulation will have the same effect as a company buying back its own shares on the stock market.

And this is why the destruction of the extra money should be set as the last priority lest you pay the debt with a high valued currency.

How To Avoid Hyperinflation (Part 1 of 2)

Why inflation happens to an economy is a phenomenon that is often discussed in the public discourses but very little is said about hyperinflation This happens perhaps because the latter is a scarier thing and it has not happened to us yet even though we came close to it in the Nineteen Seventies. But hyperinflation is nothing more than a galloping inflation that gets out of hand and goes high in a short period of time. It can happen to anyone so let us look at the subject from a fresh angle.

People toss around the saying: “All money is borrowed money” without thinking much what it means yet the reality is that the saying describes how an economy works. The trouble is that it is impossible to give much detail while discussing a large and modern economy. Thus, a better approach would be to imagine an island populated by say, 10,000 people who live in a simple, almost primitive economy. However, these people will have to be modern because, when all is said and done, their activities will have parodied a modern economy.

The island has a central bank where every morning business people go to borrow the money they will need for the day. They hire people to work for them and pay wages and salaries with the borrowed money. They also pay themselves what they call profit. At the end of the day, wealth will have been created in the form of food to eat, clothes to wear, homes to shelter from the elements, furniture for the homes, agricultural implements, and a host of services such as education, medical care, entertainment and so on.

Before heading home at the end of the day, the workers use all the money they receive; and the business people use all the profit they make to buy the products and services that were produced in that day. In theory, every business that borrowed money should have the same amount come back to it at the end of the day, and the money is then returned to the bank.

The next day the people of the island go through the cycle again in that they borrow the money, create the wealth and return the money to the bank. Some of the wealth they create will be non durable goods and they will consume it in a relatively short period of time; some will be durable goods and they will keep using it for two years or longer.

Let us now ask a simple question: What happens if a businessman borrowed money to make pottery but an accident occurs and the pottery is destroyed after he pays the workers but before he delivers the goods to his clients? The answer is that he will have no money to return to the bank because the money will now be in circulation where it will remain for ever.

But a new situation will have been created where the total amount of goods and services on the island has diminished by a value equal to the price of the pottery. And because at the end of the day all the available money will be spent on buying all the remaining goods and services, prices will rise across the board. This is inflation.

Stripped to its essence, this is how an economy that is based on paper money works. But of course things will be more complicated in a real economy even on that primitive island. To begin with, not every undertaking can be started and finished the same day, therefore workers and business people will have to keep some of the money for more than a day. Because of this reason and a few other ones, the principle of paying interest on borrowed money will have to be introduced.

There is also the fact that in a large economy the central bank cannot deal directly with all the business people who will want to use its services. Thus, another industry called financial services will have to be added to the sector. It will comprise the commercial or chartered banks and the other lending institutions which will stand as “middleman” between the central bank on one hand and the public and business people on the other. These institutions will borrow money at a certain rate of interest from the central bank and lend it at a higher rate to their clients.

The institutions will also accept deposits from their clients. At the end of the day each branch may show a surplus or a deficit, or it may break even in the sense that it will have lent as much money as came to it in the form of deposits. By law the banks that show a deficit must borrow overnight money from another bank that happens to have a surplus or from the lender of last resort which is the central bank. In this, the modern operation of a bank mimics what we had on the island when the money was returned to the central bank at the end of each day.

Still, there is a difference between the two in the sense that we now have a set up that will be conducive to unleashing the forces of hyperinflation. The reasons why this can happen are many, so let me discuss a few.

First, when you have a large and complex economy you need a government of civil servants to run the country. You also have large pools of workers in the same profession who may be members of the same union. If as a result of a persistent inflation the civil servants or one of the unions demand and receive an increase in salary, they may trigger a vicious cycle.

This will happen because an increase in wages for one party will aggravate the inflation which may prompt another party to demand a pay hike which will further aggravate the inflation and prompt still another party to demand a pay hike and so on. A galloping inflation may result and get out of hand to become a hyperinflation.

Second, because there is a relationship between growth of the money supply and growth in the size of the economy, a persistent inflation can lead to shortages in the labor market or the commodities market. By the law of supply and demand, this too can lead to a galloping inflation and the eventual hyperinflation.

Third, when a lending institution becomes too greedy, it borrows from the central bank and lends more than it should thus increasing the money supply more than is warranted. While this will look healthy in the short run in that it will stimulate the economy, it may start a bubble that feeds on itself and grow to a dangerous level. This is triggered when the other lending institutions jump into the act for fear of being left behind and do the same thing.

Eventually the bubble will burst and the institutions will be left holding IOUs whose real value will be close to worthless. They will cease to lend to each other fearing they may never get their money back and will curtail their lending to the public as a result. This situation creates a credit crunch in an economy whose lifeblood is credit.

To ease the problem, the central bank will swap the dubious loan portfolios at the lending institutions with cash or with the near excellent securities it keeps in its own vault. The justification the bank will give for doing this is that the measure will be temporary, meant to last only until the institutions get back on their feet at which time the swaps will be reversed.

But if the situation with the credit crunch is not reversed soon enough and the institutions start to go belly up, the money will never be returned to the central bank. In this case, we shall have a situation analogous to the pottery accident on the island when the money was not returned to the bank but remain in circulation for ever. The situation will also be akin to the printing of money such as it happened in a number of countries since the invention of paper money.

And this, in my opinion, can be the trigger to ignite a wild inflation and gallop to become a hyperinflation. How to avoid it is the subject of the next article.

Mr. Rupert Murdoch Speaks His Mind

Mr. Rupert Murdoch is chairman and CEO of News Corp., which owns The Wall Street Journal. He gave a speech to the Atlantic Council in Washington, D.C., on April 21, parts of which were printed in the Journal the next day under the title Enlarging the Atlantic Alliance.

The man makes what looks on the surface like a simple and elegant point, and he encapsulates it in the last paragraph of his address. Here it is:

[As a man who was born in Australia, went to university in Britain, and made my home in America, I have learned that shared values are more important than shared borders. If we continue to define "the West" or "the Alliance" as a strictly geographical concept, the alliance will continue to erode. But if we define the West as a community of values, institutions and a willingness to act jointly, we will revive an important bastion of freedom and make it as pivotal in our own century as it was in the last.]

But to get to this point in the address, Mr. Murdoch paves an intellectual road that leaves the reader perplexed. He has two beefs. The first is that Europe is losing its faith in the values and institutions that have kept freedom alive as it is apparent in the failure of nerve he sees in Afghanistan. The second beef is that House Speaker Nancy Pelosi put off a bill concerning the free trade deal with Columbia by not scheduling a vote.

With regard to the first point, we might ask if Mr. Murdoch’s pessimism is balanced by something that gives him optimism in the future of the alliance. And the answer is a cautious yes. Here is the evidence for that in his own words:

[NATO's agreement to invite Albania and Croatia…is a welcome start. So is the...commitment that Ukraine and Georgia will become members of NATO at some point…Around the world, there is no shortage of nations who share our values, and are willing to defend them. These include countries like Australia, which sent troops to Iraq…Others…are working hard to get there and would be strong partners down the road.]

So, why is Europe lagging behind when it comes to seeing things clearly and grasping what is going on in the World? Murdoch has an answer for that, and this is how he puts it.

[Unfortunately, far from reflecting our unity, NATO's entry into Afghanistan has exposed its divisions…Europe no longer has either the political will or social culture to support military engagements in defense of itself and its allies.]

But what was his vision of NATO before the organization became the weakling that he sees now? This is what he says in this regard:

[In the aftermath of World War II, statesmen…recognized that the defense of freedom would require…the Atlantic alliance. In the six decades that followed, this alliance helped the West prevail against Soviet communism.]

Clearly then, something has gotten in the way of NATO playing that same role in Afghanistan as he points out in his address. But does he say why this happened? No he does not. In fact, not once does the name Iraq appear in his address. In effect then, what Mr. Murdoch has done is urge Europe if not the whole World to unite behind the US and fight those who would not fall in line behind America’s dictates without considering for one moment the apprehension that was caused in Europe by America’s debacle in Iraq.

As to the second point, Mr. Murdoch admits that Nancy Pelosi is not alone in exhibiting protectionist sentiments. In fact, he speaks of: “the growing appeal of protectionism on both sides of the Atlantic.” But then Murdoch goes on to treat the question by committing the same sort of omission he committed while discussing the first point. Like before, he ignores the vital facts of the issue but more than that, he goes on to reveal what motivates him to do so. Here is that all important passage:

[Right now the U.S. has a test in its own backyard. Colombia is a nation that is fighting poverty, battling the drug lords, and taking on terrorists…Its citizens…want peace and opportunity. So its…president…is trying to bring the rule of law…All he asks of us is that we ratify the trade agreement…By ratifying this agreement, we would open an important market for American goods.]

Mr. Murdoch is here committing two gigantic mistakes. The first is that he is ignoring the bad advice the North Americans and the World Bank gave to the South Americans in the Nineteen Seventies. It was this advice that turned the Continent into the very rich and the desperately poor. The rich allied themselves with the “Western” powers, and the poor revolted because they used to be better off before the Americans meddled in the affairs of their countries.

As for the second mistake, Mr. Murdoch reveals how terribly insensitive he is to the needs of others. To see how he does this, look closely at that passage again. Right after he mentions that the President of Columbia wants to see the ratification of the agreement, Murdoch says the agreement would open an important market for American goods.

Now put yourself in the shoes of a South American who has all that bad history behind him and is now confronted with a future that is promising more of the same. It is not a case of more of the same because the agreement says so, most people probably have not red it, but because individuals like Rupert Murdoch are pushing for it.

Does the man at least pretend that the agreement contains something good for the people of Columbia? Apparently not because he could not care less what the people of Columbia think or feel. But Mr. Murdoch warns there will be consequences if the agreement is not ratified. And here is what he says in this regard:

[Throughout Colombia, a defeat for the trade deal would be confirmation that the U.S. is not an ally you can count on. Throughout Latin America, a defeat for the trade deal would be exploited by thugs…The same values that we are trying to uphold in the Atlantic alliance are at stake now in Colombia. And if we fail to support them in Colombia, it will be harder to revive them in the alliance.]

It is clear by now that Mr. Murdoch’s definition of what constitutes an alliance is at odds with the South American and European understanding of the concept. He sees the alliance as a community of values, institutions and a willingness to act jointly which is innocent enough until you realize what his values are, what he is willing to do and willing to ignore, and what his joint actions will lead up to.

The man wants to revive the old bastion of freedom and make it pivotal in this century as it was in the last. The trouble is that Mr. Murdoch has shown to be not a man for the Twenty First Century but a man right out of the Nineteenth Century where gunboat diplomacy was the sterling invention of the day.

Take it from me, Mr. Murdoch, those days are gone for ever. Everywhere in the World, the sight of a Chinese or European plan of development will elicit more jubilation than the sight of an American warship will elicit fear. This is not to say there will be no place for warships; there will be. Just look where the dinosaurs have gone and you’ll see a place where the warships will finally go to rest in peace.

Mr. Gordon Brown Speaks His Mind

It was only a matter of time before an Englishman or Englishwoman openly called for the expansion of the Anglosphere. Mr. Gordon Brown, the Prime Minister of Britain did just that in a piece he wrote for the Wall Street Journal on April 16, 2008. Similar sentiments have existed at least since the days of Winston Churchill as Mr. Brown points out in the piece, and anyone who watched Prime Ministers Margaret Thatcher and Tony Blair would have noticed the continuation of that trend. What separates Mr. Brown from his predecessors, however, is that he talks more about culture than politics or military matters, and this is a refreshing sign.

What is significant about the call to strengthen the ties between Britain and America is not that the Brits wish to spread their language and culture around the World in the belief that they have much to offer; many before them such as the Arabs, the French and the Spaniards have entertained similar sentiments. What is significant is that the Brits hope to realize the dream by effectuating the moral merging of Britain and America.

The attempt to merge with America in a moral sense is not restricted to the Brits; a few around the World are now or have in the past tried to do the same thing. These include elements of the Canadian Establishment, the new President of France and a few other individuals and groups. But no one has come close to the success that Israel and the Jewish Lobby are enjoying in this regard at this time.

All those individuals and groups wish to go somewhere and they want the American bandwagon to take them there. But what we must realize is that when the narrative they use covers politics or military matters, they signal that they want to do more than be a part of an ongoing debate. Their approach is that of someone who wishes to usurp the power and prestige of America to implement an agenda that is beyond their ability to effectuate alone.

From the looks of it no one entity has yet achieved total and absolute control over the American train, and the human race should be thankful for that. Yes, various players have succeeded in climbing aboard the American train through the back door, so to speak, and have tried to get to the locomotive but they barely left the caboose from where they resigned themselves to meddling with the thing.

This sort of mania happens to individuals and groups that inherit a legacy bigger than them and develop a reach that exceeds their grasp. It can also happen to an idea whose time has come and gone. But unlike the situation with an individual or a group whose lifespan is limited, an idea can last a long time if not for ever. It lingers on without interruption for a while, lies low for another while but always comes back to reclaim its old place under the limelight.

One such idea is religious devotion which can do much good but also much that is harmful. With regard to the positive side of religion, it has played an important role in the march of Western Civilization from Ancient Egypt to the European Renaissance. Much of what was accomplished in the arts and architecture, philosophy and literature, ethics and esthetics was done in the name of the deities that existed at the time. And the same is true with the Civilizations that arose in the Orient and the Americas.

As for the negative side of religion, it is something that develops when the philosophy of gentleness fostered by the religious experience is upset by circumstances. To cite one example, if famine hits the land where the church stands and the latter cannot help the people who desperately need it, someone in the religious hierarchy may be tempted to use religion to mobilize the flock and go after the political authority. This is when things may escalate and risk getting out of hand.

A new religion always begins apart from the authority of the state. In most instances, it begins in opposition to the state because it comes at a time when the rulers lose touch with the masses. If the religion becomes powerful enough to threaten the state, the head of that state jumps on the bandwagon and merges his dominion with the religion. For a while after that he will lead from the caboose because the religious authority will still be running the important matters from the comfort of the locomotive.

Overzealous religious devotion is called fanaticism. But fanaticism may also be associated with a political philosophy, a cause or a movement. In these cases, the devotion may not acquire the force of the religious fervor but it can still be turned into a potent tool or a weapon in the hands of a charismatic leader.

And so I ask: what does Prime Minister Brown expect from the merging of Britain and America? Does he expect future Prime Ministers of Britain to run the new entity from the locomotive or will they be satisfied to take a back seat and meddle in the business from the caboose?

Mr. Brown enumerates the cultural achievements of the two countries and concludes with these words: “…realizing the potential for the greater good when our two nations work together …I believe that the future of our relationship can, if we choose, deliver far more even than it has achieved in its past. Not just for both our nations, but for the world.”

That is a refreshing and reassuring stance but my concern is not with this Prime Minister who is without a doubt a descent human being. My concern is what might happen if he succeeds in creating an entity that is as potent as he describes then something goes wrong. What is involved here are ideas that will linger on for a time after we are all gone. In the hand of some unscrupulous operator, the entity can be shaken and the ideas turned into a weapon that will do as much harm in the future as Mr. Brown wants to do good.

Yes, as he says, British and American charities like The Hunter Foundation and The Carnegie Corporation can work on joint projects to alleviate suffering in the World. America and Britain can work together on projects like cancer research and the human genome. But as we know, they can also work to create a fantasy like the existence of weapons of mass destruction and trigger a horrible war such as the ongoing one in Iraq. Yes, the new Anglo-American entity may heal and elevate a few people but it may also kill the many and debase the human species.

Mr. Brown has the right attitude. He proposes a way to strengthen the cultural ties between two countries which is always a good thing. But he does not allow for the possibility that something may go wrong with the merger he proposes. As a result, he does not envisage a mechanism by which to call on the new entity to explain itself when something goes out of whack, a mechanism that would put a check on its powers. For these reasons, I propose that the Prime Minister revise his plans to add a foundation such as a peace institute or a disarmament authority to the mix.

Like it or not, the English language and the Anglo-American culture are taking over the World and they may well become a permanent feature of this Planet. Because Mr. Brown has shown how conscious he is of this possibility, he is expected to create the necessary safeguards that will protect the entity from those who would use the popular ideas of the day or the religious trends of the moment to take over and turn his creation into something different from his vision.

It is not too difficult to imagine how a charismatic leader on either side of the Atlantic may come along one day and turn the World upside down. To avoid the temptation for something like this from burgeoning at all, there should be enough provisions to make certain that the entity will at all time maintain enough respect for the other cultures and religions as to let them evolve at their own pace until they come around and ask to become one with the Anglosphere if that will be their wish.

What must be avoided at all cost is to inflame the religious passions of those who would be offended by a sudden rush to do away with their system of beliefs and their customs in favor of something that is both alien and threatening to them.

There is also something to be said about the merits of diversity. Cross-fertilization of the cultures has always been a force for innovation and advancement. Thus while it is a good idea to share with the World that which has made America and Britain very successful, it is a good idea to let a few differences stand even if such differences will seem at odds with the Anglo-American landscape. In this case a little spice will not spoil the broth but will accentuate the flavor.

Fat Cats Stay Ahead Of The Curve

One of the most upsetting problems in business and finance is the appearance of a bubble every time a sector of the economy starts to race ahead of the others. The problem is aggravated by the small investors who rush to get into the act believing that what they see is a deal that will keep rising for ever.

When you look closely at the phenomenon, you find that the small investors are the real victims in this exercise as you realize that they are pouring hard earned money into a worthless proposition. Your realization is sustained by the fact that when the bubble bursts, the small investors are the ones who suffer the most. And since the bubbles only develop where the exercise is a zero sum game, what the small investors loose, the fat cats gain.

Investigate the matter deeper still and you will that the phenomenon of the bubble was no accident to begin with but was steered by the intermediaries who stood between the small investors and the winning fat cats. The intermediaries would be the advisors who are supposed to help the investors make good decisions, while the winning fat cats would be the speculators who cash in on the gullibility and ignorance of the ill advised. And most of the time you cannot tell the difference between the intermediaries and the fat cats as they would be one and the same.

Study the history of the phenomenon and you find that after every burst of the bubble, it was discovered that at least one notable intermediary and a multitude of smaller ones were exposed to having materially affected the outcome. And in every instance the notable player would be a financial institution such as a hedge fund, a brokerage house, a bank or a near bank.

All this should lead to the conclusion that a reform of the system aimed at preventing those bubbles from forming and bursting again and again must include regulations that will do more than punish the offending institutions after the fact. They must warn them ahead of time they are treading close to the risky practices that will endanger them and harm the system.

The types of institutions involved here are many and they each have a different sort of operation. Therefore it is impossible to enumerate in detail what regulations should be written for each type. What can be done, however, is discuss what motivates the intermediaries to act as they do and what motivation they use to dupe the small investors so as to get them to put money into a scheme that is bound to go bust.

The motivation is expressed in five words: staying ahead of the curve. To get rich quick the intermediaries need to position themselves ahead of the curve which they do by influencing their clients. And the way they do that is to trumpet the benefits of being ahead of the curve then advise their clients how to get there. But when all is said and done, you find that the clients almost never get there and the intermediaries do.

In any case, the reason why the clients respond favorably to the call of their advisors is because to be ahead of the curve is a natural human desire. But the road is never an easy one because history is better predicted in hindsight than it is in foresight. This means no one knows how to get ahead of the curve when the events are still unfolding, and it is too late to get there after the events have unfolded. Thus people think of the events that come in cycles and position themselves just before the next wave is due to hit.

Alas, where human behavior is involved, the waves cannot be predicted with complete certainty but this does not prevent some people from playing the game or from explaining the events after they have occurred. In fact, some individuals such as gurus, political pundits and economists specialize in making the before-the-fact predictions or giving the after-the-fact explanations or they do both.

These individuals study past behaviors where a large number of people were involved in making an event happen because this is where it can be argued that a tiny element of predictability is introduced into the equation. The individuals make predictions based on a small probability and they can be persuasive enough to find employment with corporations such as those that deal with mass merchandizing and public relations. The corporations hire these people because to be ahead of the curve can translate into big profit and so they defy the logic of good business practices and take a gamble.

One glaring example of a cycle that has a profound impact on our lives is what happens on the stock market where a number of gurus are employed to make predictions. Here, when a new session begins and the trading resumes, every tick of the tape looks random. However, an element of cyclicality emerges when the analysis is done over a relatively long period of time. This should help to make the market predictable but it seldom does. Still, most brokers hire technical analysts to look ahead and predict the market in the belief that this will help them stay ahead of the curve.

To understand why the road to riches in the stock market depends on staying ahead of the curve, we look at the following example: You buy shares in a company at 10 dollars a share and wait for the price to go up but the price goes neither up nor down for a week. The curve representing this performance is a flat horizontal line. You neither make money nor lose it.

You have better luck the following week because the price rises to 11 dollars. You sell and realize a capital gain of one dollar per share which is a 10% profit. You have learned that to make a gain you must buy low and sell high. You look at the curve representing this performance and see that it is a rising curve.

But the market can also drop. Indeed, the most fundamental characteristic of the market is that it goes up and down over and over in a never ending cycle. If the price of the shares had dropped to say, 9 dollars instead of rising, you could have panicked and sold at that price. In this case you would have lost 10% of your money instead making a gain because you would have bought high and sold low.

Sensing that you have become a sophisticated investor, you now want more out of the stock market. That is, you want to buy low and sell high not once but with every cycle of the market so as to keep piling up the gains. Knowing something about mathematics, you know that everything cyclical is a wave and that a wave begins to drop when it has reached the highest point on the curve. It also begins to rise when it has reached the lowest point on the curve.

You wish to take advantage of this knowledge but since you cannot tell when the market is at the highest or lowest point, you can never time it. So you search for a way to make the events run behind you rather than try to run ahead of the events. You conclude that the only way you can do this is to buy before anyone else buys then trigger the rise of the market yourself, and sell before anyone else sells then trigger the fall of the market yourself.

But you have neither the funds nor the influence to trigger the market into any direction and cause it to follow you. And this is when you hit on the greatest idea of all; you decide to become a guru, a broker, a hedge fund manager or an investment banker so as to be in a position to lead the market into making you rich at the expense of those who will listen to you. My friend, you have set yourself on the road to becoming a fat cat.

In the stock market, in real estate or any business where the public is involved, these games and tricks are played all the time by individuals who are custodians of the public trust. But if you add up the corruption committed since the beginning of time in the Third World, you find that the sum total of their corruptions amounts to only a fraction of what happens in a place like the Bayou Group, Enron, WorldCom, Tyco, Savings & Loans or Bear Stearns in a single day. The difference between one and the other is the difference between someone stealing just enough to buy bread for their children and someone stealing more than enough to buy the entire country where the bread thief and the children reside.

Still, this massive corruption is treated like a perfectly legal practice until something goes wrong at which time a handful of scapegoats are gotten rid of. We may never end corruption in the Third World or in America but we can moderate its occurrence by writing new rules for the game. To do that, the financial institutions must be reminded ahead of time they cannot tread close to the risky practices that will harm the system. This is achieved by outlawing the practices that do nothing to facilitate the business but are utilized by the devious to make a quick buck.

For example, when trading on the stock market you can short sell a stock. This means you sell a stock you do not have in the hope that the price will fall at which point you buy it back cheaper and thus make a profit. To do this, you borrow the stock from the broker and return it when you buy it back. However, if the stock rises instead of falling and you do not have enough money to buy it back, you can be sued by the broker and thus risk going to jail.

If the law is changed to make the brokers totally responsible for this sort of transaction and forbid them from going after the clients to whom they knowingly lend the stock, very little short selling will be done. This alone will eliminate as much as 90% of the problems that affect the stock market operations, problems that are manna from the sky for the brokers.

Another practice that should be looked into is the one where the brokers who have the portfolio of their clients in safekeeping are allowed to buy, sell or lend the stocks. The brokers should still be able to do this under a new regime except that if a stock collapses and goes to zero, something different from the existing practice ought to be followed.

What happens now is that the broker is under no obligation to provide the client with a certificate for the defunct shares even though some companies such as those in the mining business can and do come back to life decades after they die. What I propose should happen under the new regime is that the brokers be obligated to provide the certificate to the client or refund the amount that he or she originally paid for the shares. This is only fair because most of the time the broker would have sold the shares and kept the money, and the client gets neither the certificate nor the money.

And given that many of the stocks that suffer this fate would be the ones promoted by the same broker in the first place, the new regime will cut down on the speculation and the churning that these brokers engage in as they play with the clients’ stocks and their money while taking no risk of their own.

Finally, an authority should be created to receive complaints on an ongoing basis from the public about all the small practices such as these because their cumulative effect can cause big time damage to the system. There are hundreds of them that need to be looked into right now and a decision taken about them right away.

That authority will deal with the securities institutions, the banks and all the financial institutions that transact with the public. And because new financial instruments are created all the time, the authority must be prepared to make new rules at any time to correct for every risk that the new instruments bring to the market.

Free Trade And The Doha Round

On April 11, 2008 Simon Crean who is Australia’s minister of trade and Susan Schwab who is the US trade representative wrote a piece in the Wall Street Journal under the title Doha Dealbreaker that is so remarkable it will stand as a classic for some time to come.

What they say is that the Doha negotiators must give the service sectors of the economy the same consideration they do the agricultural and industrial sectors and they warn that the US and Australia “will not support a Doha package unless it includes an ambitious outcome on services that delivers commercially meaningful results.” They don’t spell out what they mean by not supporting the package but they are forceful when it comes to promoting the service sectors as seen in the following paragraph.

“In today's world, access to world-class service providers can be the difference between economic growth and stagnation. Open markets promote innovation and entrepreneurship, generate lower costs and higher-quality goods, increase the pace of technology diffusion, and attract more foreign investment.”

To see why the piece is remarkable you need to look at the following two paragraphs which do not come back to back in the piece but tell volumes when they are juxtaposed.

“In fact, several developing countries have autonomously liberalized certain sectors of their economies as part of their development strategy, recognizing that high services barriers only constrain their economic potential. For example, telecommunication markets have been opened up throughout the developing world, and everywhere this has resulted in greater telephone access and lower charges, with profound positive effects on rural farmers, small businesses and industrial exporters.”

“It is understandable that some countries are reluctant to offer more on services, especially in the absence of greater clarity in other parts of the Doha package. However, it is our view – and indeed a broader view – that the round will only deliver in terms of global growth and development if all areas of market access – agriculture, industrial products and services – are negotiated satisfactorily.”

It is clear that the writers believe everyone at the negotiating table understands exactly what they are saying and nobody disputes it. Nevertheless some countries are reluctant to go along with the idea at this time because, the writers say, those countries have understandable concerns that have not yet been addressed given that the negotiations are still ongoing. So, what’s the beef about? Why threaten they will not support the package when the negotiations seem to go smoothly?

It may well be that the reason for the beef is hidden in a history that the writers are too young to remember or do not wish to reveal. So let me give it a try. Is it possible that the industrialized countries now realize their pundits made a mistake a generation ago when they guessed how the Universe will unfold as the underdeveloped countries develop?

The pundits of the time pontificated – more like speculated - that the underdeveloped countries would, for a long time, produce labor intensive, low-end low-technology products such as shoes, leather products, furniture and textiles while the developed countries would continue to produce capital intensive, high-end high-technology products such as cars, computers and electronics.

But, as if to confound the pundits, the underdeveloped countries leapfrogged ahead of themselves in no time at all and began to develop on several fronts at the same time. Yes, they produced the shoes and the textiles but they also produced the cars and the computers. And this left the developed countries with no area in which to grow and create jobs for their people except the service sectors of the economy.

The result was that the developed countries had no choice but to buy all sorts of goods produced in the developing countries and run up trade deficits. To pay for the goods and reduce the deficit, some countries such as the US and Australia now seek to export services to the developing countries, a stand that is understandable but one that does not explain the beef.

Consequently, what the negotiators must be careful not to do is repeat the mistakes of the past by listening to false pontifications as to how the future will unfold this time around. Instead, the Western negotiators must take their eyes off their navels and look at the faces of their negotiating counterparts. More specifically they should look at the foreheads where they will see written: “I have a culture I need to protect.”

The US, Australia and the other Western nations can sing all they want that: “Comprehensive services-sector liberalization…would permanently boost the global economy by more than $1 trillion,” but the fact remains that culture is a big part of the services they want to export to those countries. And they must be made aware that they risk getting a backlash if they push too hard at making the liberalization too comprehensive.

Also it is important to remember that the cultures of the developing countries will evolve to adapt to their new industrial status anyway. But this does not mean they will look like any culture existing in the West now nor should they. In fact, many in the Orient have fully industrialized and they did it by blending with the new what they regard as worth conserving in the old, and they are doing marvelously well. Who are we to say they could have done things differently or done them better?

If any lesson should come out of all this, it is that adaptation of the cultures must be a two way street. The motto in the West should now be: Let the developing countries adapt their way at their own pace but let us adapt as well. And what we need to do here is iron out the internal contradictions embedded in our culture before we ask the others to accommodate us.

With millions of youngsters unemployed and many of these unemployable, with hundreds of thousands more incarcerated who will likely return to jail when released, we need to ask if we are not fooling ourselves into believing we are what we are not. After we honestly answer the question, we must get down to business and revamp what we call our system of laws.

Instead of spending billions of dollars to look after people in the prisons, asylums, half way houses, hospitals, dysfunctional schools, boot camps and what have you, let us find a way to put them to work and pay them a salary commensurate with their abilities. This will give them dignity, a sense of worth, a way to develop the work ethic and the discipline to go with all that. In return, they will produce the goods that we import from the developing countries but cannot now produce because we have a wage structure that is pricing us out of the market.

This is not to advocate doing away with the minimum wage or the labor laws or even the child labor laws. But in the same way that we set up a number of parallel systems we regard as charity or correctional or voluntary, we can set up a system that will take those whom we normally punish and give them a way to rehabilitate themselves without extending to them all the rights they forfeited when they broke the law.

Nobody frowns when someone suggests that a thirteen year old who has committed a horrible crime should be tried in adult court. But say that this kid should be made to work while incarcerated at half the minimum wage so as to develop good habits, and the phony bleeding hearts come out of the woodwork to act out their make believe discontent. Get out of here! We should have no patience with these characters.

What we are seeking here but do not wish to admit to ourselves is economic salvation. But our salvation will not come at the expense of the other cultures because they had nothing to do with our near damnation in the first place. They played the game by the rules we set up and even if they do agree to our changing of the rules in the middle of the game, we shall not be accommodated for the long haul because what is wrong with us exists in the structure of our core beliefs.

In consequence of this, we must resolve never again to dictate to others but to learn from them what was once a part of our culture but has disappeared with the passage of time. Our pundits made a mistake in the past when they thought the developing countries will take a long time to produce quality products we can buy and be satisfied with, and we are about to make the same mistake thinking they will not outdo us in the service sectors as well.

By all means, let us liberalize trade in the service sectors but let us do it at a pace that the developing countries can stomach. Most importantly, let us think seriously about an industrial strategy that will make it possible for us to compete in the industrial sectors too because we shall need to fire on all cylinders to get our economies back on their feet.

The World Economy After Communism

Now that Communism has vanished as an economic system and almost vanished as a political system, we can assess how the alternative has fared without stirring up fears in the heart of some people that the dreaded system will be allowed to creep back into the World if we do not lambaste it at every turn. The faint hearted can rest assured that no one is advocating moving anywhere near the slippery slope that will lead to a centrally planned economy.

However, no matter which way we tackle the subject, the discussion will always come back to asking a simple question: Do the advanced industrial economies such as Canada and the United States need an industrial strategy? The free market ideologues say no, there is no need for that under any circumstance. They explain that an industrial strategy will mean the setting up of a centrally planned approach to industry which would violate the free market system and lead to disaster. They give as example the bankruptcy of the centralized economies in the former Soviet Union and its satellites.

At the core of these people's ideology is that the success of an economy depends on the choices that are made for it by one of two entities. One entity is the marketplace which rewards the industries that deliver what the market wants while punishing those that fail to do so. The other entity is the committee of government bureaucrats whose job is to choose winners and losers. Needless to say the ideologues put their faith in the marketplace and scorn the idea of a government involvement in the process.

In my view these people got it almost right but not quite. What they neglect to include in their views are the distortions that always creep into the marketplace, a pernicious problem that never fails to manifest itself in every situation. Because there is this problem, you either leave it to the marketplace to correct the distortions or you intervene just a little to help the economy deal with them. And the moment you do intervene - however little this may be – you set yourself on the road to working up an industrial strategy. But rest assured this will not signify the end of the World.

Of course there are alternatives to intervening just a little in the marketplace. They are to intervene massively or to refrain from intervening at all. To see why neither of these options is desirable, we need to understand how and why a distortion develops in a marketplace driven by the modern phenomenon of Globalization. What we are facing here are two paths to industrialization, the organic path and the artificial path both of which exist at the same time; each of which capable of affecting the other in a measurable way.

When no one was yet industrialized some two centuries ago, those that began the process had no choice but to embark on the organic method of industrialization. Having no model of an industrial product to copy and no production machine to produce it with, these people improvised everything as they moved along not knowing where exactly they will end up.

Beginning from scratch, the pioneers of industry invented, designed and constructed both the products and the machines that make them. As the products evolved so did the machines which then changed the products that required new machines and so on. This is organic growth which is still going on today in the countries that are at the leading edge of science, technology and industry.

The developing countries, on the other hand, know exactly where they are going as they follow the model of those who preceded them. And to get there, they acquire existing machines with which they copy existing goods. When these countries put down a plan to develop and to expand their industrial base, they do not grow by the organic method. Rather, they expand in a well thought out artificial manner leapfrogging their way to the leading edge of science, technology and industry. Once there, however, they will start to grow organically in lockstep with the advanced players because they too will be so advanced that there will be no one for them to copy.

As long as the two Worlds were kept separate economically, the underdeveloped East remained the East, the developed West remained the West and the twain never met. But then Globalization happened and the rules of the game changed because neither the developed World nor the underdeveloped one are now immune from the distortions that the other is imposing on the marketplace.

However capitalistic some developing economies seem to be, they are in reality planned economies by the mere fact that they grow artificially and not organically. Also, they rely on reverse engineering which is less expensive than forward engineering. This gives them a considerable competitive advantage over the developed economies that pay for the forward research and development. This situation defines the distortions that the developing economies introduce into the marketplace and it is why the developed economies must adopt an industrial strategy and counter the effects of these distortions.

What is needed is a minimum intervention that will be proactive rather than reactive. To reach this goal, the developed World, which now includes the newly industrialized countries, must come together with the developing World and discuss a regime of free trade which will encompass the entire Planet. The regime will be made of incentives to encourage everyone to follow the rules, and provisions to protect everyone from the consequences of the distortions. The main points to consider when hammering the rules will be the following.

In theory, if everyone that has a competitive advantage in one thing took full advantage of the thing, there will remain in the long run only a handful of industrialized nations left on the Planet. Since most nations will not allow this to happen, everyone will work to defeat the situation with the known consequences that include trade wars. We must therefore set up a kind of international safety net not for individuals to fall back on but for countries to fall back on.

We begin with the recognition that every country has the right to set priorities for itself. For example, the auto industry is important to countries like the United States, Korea, Spain and so on. Another example would be the cultivation of rice which is important to countries like Japan, Bangladesh and other nations.

Consequently, all countries will have the right to protect a certain number of agricultural and industrial products they consider important to them. They can do so only up to a certain percentage of their local consumption of these products. For example the Americans could say we consume 16 million cars a year and we must absolutely produce 25% of that number for our economy to remain healthy. We shall therefore protect our local auto industry up to that level with all the means we have at our disposal including the leveling of new tariffs on imports, with subsidies and everything else we deem necessary. The Asian countries will do the same with rice and so on.

How many items and what sort of products can be included on the protected list by each country will have to be negotiated in a forum like say, the World Trade Organization. Also the level to which those products will be protected should be negotiated. The 25% level was used here as an example only.

In return for this, the advanced countries will make available to the developing countries leading edge technologies concerning the protection of the environment. And for the countries that are just beginning the process of industrialization there will be massive educational, technical and advisory assistance made available to them. This assistance will be designed to help them catch up with the rest of the World in the shortest period of time.

As everyone develops, each will discover areas where they have a competitive advantage and will concentrate on them. In the meantime, if products are important to them but they lack any sort of advantage in the area, they will fall back on the safety net and protect those products. Thus, with incentives for everyone to take advantage of their strength and a safety net to protect them from being overwhelmed where they are weak, no one will try to defeat the system or cause chaos.

In conclusion I ask the question again: Do industrial countries such as Canada or the United States need an industrial strategy? And the answer is yes. But we must be mindful that the strategy can exist only to remedy the distortions of the marketplace, made more acute by the phenomenon of Globalization in a World that has not yet been evened out between the developed economies and those on their way there.

How Durban Destroyed The Superstition

Try to have a discussion with a radical Judaist and you will quickly realize you can never tell where these guys stand on any issue because you will see them skip all over the map depending on how the discussion progresses. One singular issue you will never resolve with them is whether they take the words of the Torah literally or figuratively. This is because if they say they take the words literally, it would mean they believe that the Torah is the word of God. If they say they take the words figuratively, it would mean they believe that the Torah is a book of superstition more than anything else. But given that they want to have it both ways, they will oscillate between God and superstition like a tennis ball in a match between two players.

In any case, engage these people in a serious discussion and you will hear them make the following statements: The reason why Israel deserves to exist at all is that God promised the land of Palestine to the Jews. And the reason why Israel deserves to be protected now more than ever is that God said those who bless Israel will be blessed and those who curse Israel will be cursed. Thus, if America, which is God's lighthouse to the World, wants to be blessed even more she must protect Israel more than ever.

Keep on talking to them and they will eventually come around to doing what they do best which is to unleash a bitter diatribe against everyone. For example, they will say that the Palestinians are not as dispossessed as they claim to be because they have money pouring to them from every corner of the globe. To illustrate the point, they will tell you about a moment when the Palestinians breached the wall between Gaza and Egypt and went on a spending spree during which time they blew 300 million dollars on luxury items in a matter of days.

Those radical Judaists will then contradict themselves by blasting the oil rich Arabs whom, they say, are not doing enough to help the impoverished Palestinians. This is one contradiction they will make but it will not be the last because the whopper will come when you remind them of what they said the Torah is saying, and compare that with what they describe as the reality on the ground.

Reason aloud that if the Palestinians have some money and the Arabs have lots of money therefore it must be that they are blessed by God if we are to believe what the Torah is saying. This makes the Palestinians and not the Jews the chosen children of God, and makes Arabia not America God's lighthouse to guide the World to an everlasting Nirvana. Consequently, if they believe in what they say, either the Torah is a pile of superstitious falsehoods or God is on the side of the Palestinians and the Arabs not on the side of the Jews or the Americans.

I cannot guarantee what will happen next because it all depends on the temperament of those whom you engage in the discussion. My advice to you, therefore, is that you proceed with caution and do so at your own risk. But to understand what happens when you try to have a serious discussion with a Judaist disciple of Zion, you need to look at a few pointers.

There is the story of the kings in the old days that killed the messenger who brought them the bad news. In a parallel fashion, those who run the Jewish Establishment today will kill you figuratively if you question the assertions they make especially if the assertions contradict each other and expose the arguments they are advancing as bogus.

This attitude should not come as a surprise when you consider the biblical story of Adam and Eve in Paradise. It is the story of the devil that appeared in the form of a snake and told the couple to eat from the forbidden tree as this will give them the knowledge that God has. When the couple succumbed to the temptation and ate the forbidden fruit, God became so incensed he kicked the hapless pair out of Paradise. The lesson here is that knowledge is bad for you.

But in this day and age knowledge sits no farther than the finger tip of anyone who has access to a computer. So, why do these characters get upset when you display some knowledge? The answer is that knowledge as bits of information left unorganized is no more useful than a box of tools that no one knows how to use. But the moment you question those who try to pull a con job, you display the ability to effectively use the tools. And this is when alarm bells ring at the inner sanctum of the Jewish Establishment.

Something that is brewing these days and will be brewing for a while is known as Durban 2. When it takes place in 2009, it will be a follow up to Durban 1 which took place in the city of Durban, South Africa in the Fall of 2001. What happened at that time illustrates how organized knowledge can move things. You can never tell in advance in which direction things will move but move they will, and this is usually better than paralysis.

The following two paragraphs are a reprint of an excerpt from the book I wrote and whose publication was blocked by the infamous Jewish Establishment. They tell the story of Durban 1 and put the tale into its proper context.

"The month of September 2001 saw two events that shook the world. One was highly publicized and the other highly suppressed except to the thinking Jews who are serious about the fate of their people. The publicized event is of course, the tragedy of September 11, and the suppressed event is the UN Conference on Racism which ended only 3 days before. What was earthshaking about this conference was not so much that Israel and the United States walked out of it the moment that people began to present evidence Israel was a Nazi-like racist state but what happened shortly after that, only a few days before the events of September 11."

"What happened a few days before the occurrence of the Afghanistan based terrorist attack on the United States is that members of the World Jewish Congress and their supporters in the United States and Canada were going around telling their audiences about the Nirvana-like condition which the State of Israel and its citizens were enjoying. What sort of Nirvana is that? You won’t believe this, dear reader, unless and until you see it for yourself. Those characters were going around - and they went on the Jim Lehrer Newshour - to proudly proclaim for everyone to see and hear that Israel is now and they want it to remain a regime like Iran and Afghanistan. Yes, this happened, folks. The ardent supporters of Israel, members of the World Jewish Congress said that Israel was like Afghanistan and Iran, and they want it to remain as such because they approve of those regimes. And that’s why they walked out of the UN Conference in South Africa and dragged the US delegation out with them. And it all happened just a few days before the events of September 11, 2001."

If the events of September 11, 2001 had not happened, the Jewish organizations would be going around today lauding the merits of theocracies and presenting Israel as the theocracy par excellence because "it is the only Jewish theocracy in the Middle East." But the events of 9/11 killed the superstition that the Jewish organizations were warming up to after Durban 1, and they stuck with their old refrain "Israel is the only apartheid democracy in the Middle East." So love it for what it is.

What the good people of the World did at Durban 1 was to show that Zionism is a form of racism because it gives more rights to one people than to another. What the reaction of America and the Jewish Establishment did was to demonstrate to the American people what the rest of the World has always known which is that Zionism is not only a form of racism but a full fledged crime against humanity as was the creation of the state of Israel.

As the people of America come to realize that Palestine was not given by God to every quack who calls himself a Jew, and realize that America was never the lighthouse to guide the World to Nirvana, they will understand the enormity of the crime against humanity that was committed with the creation of Israel, and the responsibility that their country must bear for participating in this dreadful act.

They may then want to do all what is in their power to reverse the crime. It will be easy to do so because the World has the model of South Africa to follow. This is a country that went from apartheid to a reasonably well run democracy without the political or economic convulsions that the pessimists were predicting. The same can happen to Palestine, and everyone will be better off for it especially those who are suffering the most from the present situation.

A Stereotype To Rob Future Generations

Running a budgetary deficit is not the only way for one generation to lead an excessive life at the expense of future generations because there are more ways by which a generation can live irresponsibly. For example, it has been demonstrated that abusing the environment is a way of living that will be paid for by future generations. Another way is to tolerate an ongoing injustice that is sure to blow up in the face of future generations. To understand this part we need to recall a few things about the system of justice.

The universal symbol of justice is a blindfolded woman holding up a scale which is an elegant metaphor that tells a simple story. It says that justice requires a recognition of the fact that equality must prevail among the people regardless as to who is being judged. Of course, justice is dispensed in a court of law but this is where we go to seek it if and when we do not receive justice in the course of everyday living. Thus, the real story behind the woman holding up the scale is that we must all be treated equally to start with.

When in the real World things do not go as they should and a dispute arises, it is never about the requirement that we be regarded as equal before the law because this point has been settled. Rather it is about the question as to whether or not justice can be rendered in full with every case. The complication in achieving this goal stems from the fact that the situations where justice is sought come in different categories, and this makes it impossible to measure justice by one and the same yardstick.

One category where justice is sought is that which separates the individual right from the group right. In this category, it is easier for the Courts to render full justice in matters where an individual is concerned than when a group is concerned. This is because it is easier to assess the damage done to a single individual and prescribe a remedy than do the same thing where whole a group of people is involved.

Another category where justice is sought is that which separates the fundamental human rights we obtain by right of birth from the acquired rights we obtain by entitlement. The human rights are written into the Constitution of every country as well as the UN Charter. They range from the right to live in dignity to the right of seeing one's life protected by the state. As for the acquired rights, they range from the promises written into the social contract which every country draws up for its citizens to the contracts which individuals draw up with one another to the contracts which corporations enter into and so on.

The most difficult legal challenge facing the American system today is that which comes under the rubric of Affirmative Action. This approach seeks to remedy an injustice that was done to a group of people who were enslaved because of the Black color of their skin. After a long debate it was deemed reasonable to assume that all the descendants of those slaves have suffered damages to one degree or another.

It then became immediately clear that it will be difficult to fully right the wrong done in this case because the original White culprits who enslaved the Black population are dead and cannot be called upon to pay for what they did. However, their descendants are here and it was reasonable to assume that they benefited from the situation indirectly if not by directly inheriting the ill gotten gains. But this is not where the story of compensation ended; it is where it began to take shape.

That is because the descendants of the culprits had mixed with the descendants of the other White people who had nothing to do with slavery, as well as with the Latinos, the Asians and the other Blacks who came to America after slavery was abolished. Consequently, it was deemed that none of these people can be held directly responsible for what happened even though all of them may now be benefiting from the situation, if only because the potential competition from Blacks has been reduced.

To restore the situation to a perfect balance in such cases it would have been necessary to accurately assess the amount due by every individual who may have benefited from slavery and accurately assess the amount owed to every individual who may have been wronged by slavery and do the math. Since this was impossible to accomplish, a collective sort of compensation was negotiated according to which wealth and privileges are to be transferred from one group to the other. And this is what Affirmative Action is mandated to oversee.

Time will tell whether or not that lofty goal will be achieved to the satisfaction of everyone. In the meantime, the lesson to be learned here is that the wealth and comfort of the generations that tolerated slavery is being paid for by the current generation and will continue to be paid for by the generations to come. Thus, to prevent something like this from recurring, we must understand how that situation happened in the first place then put down the safeguards which will prevent similar situations from taking root.

That situation started with the belief in the false premise that Blacks were inferior to Whites. In turn the belief resulted in the failure of society to acknowledge the birthright of Blacks and in the failure of government to extend to them the same protection the other citizens were enjoying. And everything wicked followed from there. Today, we have a single word to mean a false premise attributed to a people identified by a shared characteristic. That word is stereotype whose use is increasingly becoming a warning signal that troubled waters lay ahead.

It is not too difficult to see why this is so in light of the American experience. We saw how one generation holding on to a stereotype robbed the current generation of its wellbeing yet the experience is not preventing the stereotyping of people today. In fact, while the present generation is far from done paying for the mistakes of the past, someone is trying to add to the resulting tragedy by duplicating the performance although in a slightly different way. To understand this, we look more deeply into the stereotype phenomenon.

There are different types of stereotype. There is the destructive stereotype which is the belief in the absolute wickedness of a group of people, the exaggerated stereotype which is the belief in the absolute goodness of another group of people, and the dual stereotype which describes one group of people as being perfect in every way at the same time as it describes a competing group as being evil in every way.

That dual variety of stereotype is being advanced today to portray the Arabs and the Muslims as being wall to wall demons at the same time as it portrays the Israelis and the Jews as being wall to wall angels. Some people argue that this is no different from the internment of the Japanese during the Second World War. Others say it is the same as the subtle discrimination which was practiced with regard to the Jews, the Poles, the Irish and the other races at an earlier time. I say no, the situations are not the same, and the comparison is a false one.

On the one hand, the Japanese, the Jews, the Poles, the Irish and all the others were subjected to a destructive kind of stereotyping which was the natural outcome of human fears, frailty and ignorance. The lasting impact on the nation was comparable to that of an accident or a tribal mini war. The situations were dealt with at an individual level and were resolved to the satisfaction of most participants.

On the other hand, what the Arabs and the Muslims are being subjected to is a dual stereotyping. It is the deliberate design and execution of a scheme masterminded by the devil himself. The attacks on the Arabs and the Muslims are a crime against humanity designed by the Jewish Establishment which lifted ideas from the blueprints of slavery in America and the blueprints of the Holocaust in Nazi Germany.

They combined the worst of the two in one grand blueprint to shamelessly do in the open what the Nazis did in secret as the latter understood how shameful that was. The Jewish Establishment does not even come close to understanding that to claim religious supremacy is no more acceptable than to claim racial supremacy, made worse by the fact that they are doing it shamelessly. They do not see that if they keep doing what they are doing, they will make the expression Jewish religion more dirty than the expression Aryan race.

Still, there is a difference between what the Nazis did and what the American Jewish Establishment is doing. The difference resembles that between a criminal who botched a bank robbery and a serial killer who taunts society because of an injury he says he sustained as a child. And with a false claim like this, the Jewish Establishment has managed to mobilize the media and the security apparatus of America, and to use them as tools to execute their demonic scheme. This will leave an impact on the future generations of America that no words can ever describe.